October 1, 2005

Storm warning: You may not be covered for losses

Couple finds policy only pays for damage from sewer
backup

Buying flood insurance is virtually impossible: Industry spokesman

After a traumatic experience with the after-effects of
the storm which hit north of Toronto on Aug. 19, Gail has learned more about insurance law
than she ever wanted - or needed - to know.She was also just one of the 15,000 people who submitted insurance
claims estimated to exceed $400 million as a result of that one storm.

As well, she s on the hook for many thousands of
dollars in damages her insurer says are not covered.

Gail and Don (not their real names) have been close
friends of mine for many years.When
Gail called to tell me about her run-in with both Mother Nature and her
insurance company, I could feel the pain in her voice.

Gail and Don live in an up-scale house near Bayview
and Steeles - not far from a branch of the Don river which flows under that intersection.

Their son Michael was home that afternoon, visiting
from abroad.

When the storm hit, Michael discovered that a torrent
of water had pushed against a basement window and forced it open.Water was pouring in until Michael jammed the
window closed and duct-taped the edges.He achieved some success, but water continued to seep in.

The basement broadloom was covered with water.A wall unit suffered extensive damage as did
the bottom of the drywall on all four walls.Fortunately, Michael disconnected and moved the stereo cables and
computer wires.If he hadn t been home,
the equipment might well have been toast.

Unaware of what was going on at home, Gail stopped at
a shopping plaza on Centre St.in Thornhill for some retail
therapy.At the time it was not
raining and there were no storm warnings on the radio.

Unfortunately, she chose to park her car at the lowest
level of the plaza s parking lot.

When she came out a short time later (because the roof
of the store was leaking and the customers were evacuated) she discovered her
car was in water which covered the tires and the interior seats.

The parking lot was a lake, she told me.

Eventually, a Good Samaritan came along and towed Gail s
car to higher ground.She opened the
doors, drained the interior and drove the short distance home.The car never worked again and was a
write-off.

During all this excitement, Don s office was
experiencing its own problems.He has a
ground-level office condominium on Yonge St. not far from home, and it too was
flooded.

Storm drains outside the building backed up, and water
came in under the front door - ruining the carpet and causing massive
disruption requiring relocation of filing cabinets and computers.

Following this triple whammy in one afternoon, Gail
learned the hard way about insurance policies and water claims.

Damage to vehicles from rising water is covered if the
vehicle has comprehensive coverage. Don and Gail have settled with their
insurer for the car s value less the $1,000 deductible.

Water damage to
homes and offices is only covered if the water source is actually from sewer
backup, and the policy contains a rider for water and sewer back-up coverage.

Overland flooding is not covered.If water enters a house through the walls,
windows, or cracks in the floor, there is no coverage.

If the water in the basement is clean there s no
insurance.But if the basement is filled
with water and sewage, the insurance company will come to the rescue if the
policy contains the appropriate rider.

Insurance companies view inadequate drainage as a
structural defect or a maintenance issue,and specifically exclude it in home insurance policies.

Similarly, repairing mould damage resulting from a
basement flood is also excluded from policies, although wind damage from
falling trees is covered.

If a storm is classified as a catastrophic loss by
the government, like the storm in Peterborough on July 15, 2004, the government may pay for losses, but the insurance
companies won t.

John Karapita, a spokesman for the Insurance Bureau of
Canada, tells me it s virtually impossible to buy flood insurance in Ontario.

The best type of home insurance available on the
market today is a comprehensive policy covering all risks. But an all risks policy doesn t cover all
risks.It covers all losses except
those listed on the policy as excluded, and water damage is excluded unless
it s due to a sewer backup.

Gail and Don s house insurer turned them down
flat.They even had difficulty getting a
crew in at their own expense after the storm to dry the basement out, but Saul
Berlin at Restorx came to the rescue that weekend with a crew to remove the
carpet and big fans to dry out the wet walls.

Some of Gail and Don s neighbours with a different and
better insurance company, got full coverage.

Don s office insurer also initially denied coverage,
but two adjacent office units in the same complex with the same water problem
have had their losses covered.By the
end of last week, a final decision on coverage still had not been made.

I feel abandoned by my insurance company, Gail told
me last week.

She will be choosing her next insurer very, very
carefully.

And she will be checking its claims payment record by
asking friends and neighbours for their experience with insurance claims.

For Don and Gail, it has been an expensive lesson.

Bob Aaron is a Toronto real estate lawyer. He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.Visit the Toronto Star column archives at http://www.aaron.ca/columns for articles on this and other topics or his main webpage at www.aaron.ca.